West African Resources – (ASX: WAF, Share Price: $0.415, Market Cap: $241m, coverage initiated @ $0.08 in Sep 2015 – current gain of 419%)
Key Catalyst
Latest drilling and metallurgical test-work results at Sanbrado gold project in Burkina Faso point to enhanced project economics in updated Feasibility Study due for completion in Q2 2018.
WAF has remained one of best-performing emerging gold production plays since we initiated coverage two-and-half years ago. The company has generated a share price gain of +400% as it has moved steadily towards production status at its Sanbrado project, as market confidence in the project continues to grow. A Feasibility Study released during 2017 confirmed Sanbrado to be a robust project with strong early cashflow, rapid capital payback and expected production of 150,000oz p.a.
WAF is continuing to drill and conduct metallurgical work at Sanbrado, with an updated resource estimate on track for Q1 2018 and updated Feasibility Study set for mid-2018, which will incorporate additional drilling data and be based on a combined open-pit and underground mining operation.
Project Overview
West African Resources holds a 100% interest in the Sanbrado Gold Project in Burkina Faso, which hosts Probable Reserves of 894,000oz (16.8Mt at 1.7g/t gold) and Indicated Resources of 1.3Moz gold (29.57Mt at 1.4g/t gold using a 0.5g/t cut-off).
A further resource update is expected in Q1 2018, ahead of the completion of an updated Feasibility Study in mid-2018.
Once complete, WAF will analyse development scenarios, leading to a revised open-pit and underground feasibility study and project finance proposals in H1 2018.
Figure 3: Sanbrado Gold Project – Mineralised Trends and Prospect Locations
A Definitive Feasibility Study (DFS) for Sanbrado released in February 2017 confirmed:
- Forecast annual production of 150,000 ounces of gold over the first three years of the project and 93,000oz gold per year over the current nine-year mine life
- Low All-In Sustaining Costs (AISC) of US$708/oz over the first 3 years and US$759/oz over Life-of-Mine
- Strong economics – pre-tax NPV5% of $143m, IRR 27% and post-tax NPV5% of $100m, IRR 21%
- Mining and environmental permits approved.
Summary
The improved metallurgical recoveries from M1 South are likely to result in a considerable improvement on expectations for the updated feasibility study, which is due for completion in Q2 2018. The situation will likely be further enhanced by recent drilling results, which indicate a robust resource at M1 South where both ounces and grades are likely to grow as Inferred Resources are converted to Indicated at the already-impressive 22g/t Au ore body. Furthermore, exploration potential remains high, as high-grade mineralisation remains open at depth below both the M5 and M1 South deposits, with a $17m cash balance to fund drilling.
